Whenever you’re on a business trip that takes you away from the general vicinity of where you live, you’re allowed to deduct 50% of the cost of your meals, incidentals, and business related entertainment. You have two ways you can calculate this deduction.
One option is to keep track of the actual money spent during your trip. The easiest way to do this is by keeping all the receipts together, or by charging everything on one credit card. At the end of the trip, simply tally up what you spent.
A second option is to base your deduction on the per diem rates. Here, the IRS actually simplifies your bookkeeping. Each year, the federal government assigns one of six per diem rates to every metropolitan area in the country. Currently, the rates range from $46 to $71 per day. A listing of the per diem rates by metropolitan area for the Continental United States is available at www.gsa.gov/portal/category/21287.
Please note that people looking to base their deductions on the per diem rates can only use per diem rates for their meals, incidentals and business entertainment. Other travel expenses must be based on actual expenses incurred. While the per diem tables do include daily rates for lodging, these rates are set to be used by companies to reimburse their employees for their lodging.
To calculate your deduction using the per diem rates, simply multiply the number of days you were in a city by that city’s Meals and Incidental Expense rate. It couldn’t be easier, and it relieves you of the burden on keeping track of your individual meals and entertainment receipts.
Did you travel outside the Continental United States last year? If so, you should be aware that the Department of Defense sets the per diem rates for travel to Alaska, Hawaii, and the US Territories, and these per diem rates are available at: www.defensetravel.dod.mil/site/perdiemCalc.cfm. The State Department sets the international per diem rates, and you can find those rates at: aoprals.state.gov/content.asp?content_id=184&menu_id=78.
Evidently, there is even an App available to help you track your expenses based on the per diem rates. Go to www.gsa.gov/portal/content/302273 for the link to download this App onto your iPhone or BlackBerry.
Which method should you choose? For each trip, you get to decide whether you’ll base your meals and entertainment deduction on the per diem rates or on actual expenses incurred. You can use both methods during the year, but only one method per trip.